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Royaltiesby Vicki Hinze

Would you
please discuss "net" as it relates to the
amount that a writer eventually receives as
royalties?

Let's compare gross and
net.

Gross: the total amount of cumulative
sales on a book. (Cumulative, because it can come in the
form of book sales, foreign, audio, film, or other media
options, as well as games, products, etc. This is the sum
before anything is deducted.

Net: Net on a book is what's left from
the gross after all expenses are deducted. (This can
include marketing, advertising, a prorated share of
overhead, as well as the usual advance reading copies of
the book and such.)

Does a writer have any
negotiating space at all on how net is calculated?

No, none whatsoever. Net
is calculated by the company according to its criteria.
The author can't tell the company how to run its business
or how to assign costs to a specific project.

That does NOT leave the
author at anyone's mercy, or it shouldn't.

A friend of mine signed
a contract that specifies only that she gets a net
amount, and her first royalty check was for less than
$20.00. She understood that her gross on the books
were to be in $4.00 to $5.00 range, and she knows a lot
of books were sold. She knew she was getting only
the net, but had no idea the net would be such a tiny
amount.

Herein lies the problem.
Your friend signed a contract specifying only that she
gets royalties based on net. That means the publisher can
deduct any and everything--and will, because it's the
publisher's business to make money--and that leaves very
little to be considered as "net." That is the
object. To show as little profit as possible.

In a situation such as
this, the author should request a Reconciliation to
Print. She might not get it because she didn't put it in
the contract. This is a full disclosure of the book. How
many copies were printed, shipped, sold, returned. All
expenses assigned to this book are included on this form.
This would at least give the author the insight on what
this publisher charged against her book.

Mind you, there's nothing
to be done about it, because the author agreed to
royalties based on net and didn't narrowly define net, or
issue limits. This is why an author ties royalties to the
retail price of the book.

Tied to retail, the author
doesn't sign on to pay costs in which s/he has no
control.

Tied to net, every dime
earned by a book--or more--could be spent and the author
would have nothing to say about it. If the book is in the
red due to costs, technically, the author is liable for
his/her share of that money, though frankly, I've never
seen a reputable publisher do that.

Bottom line: tie royalties
to retail price of the book, not net. Never net.

She did sign this
contract without an agent.

Herein is the hazard.
Literary contracts are extremely complex and unless
you're a literary attorney--not a normal attorney, but a
literary attorney--or an agent with access to a literary
attorney (reputable agents always do)--you don't need to
be negotiating contracts. In this, what you don't know
can hurt you on this book and for many or all books to
come.

Without realizing it--one
"s"--you can give that publisher an option on
all future works rather than the next work of the
specific type you've written. You can, without realizing,
sell your pseudonym, give away a lot of your rights.
Or--as in the case of your friend--tie your royalties to
net without net being defined and limited which leaves
you with no money and potential liability.

My best advice: I've sold
about fourteen or so books now, I have a legal
background, a corporate background, and a degree in
Business Ethics and I'm telling you there is no way I'd
negotiate a literary contract. Every word on those
twenty-odd pages is there for a specific reason. I don't
know them all.

If you get an offer on a
book without an agent, you have options.

1. Call your dream
agent and ask him/her to negotiate for a 10% fee.

2. Call a literary
attorney (you can find a good one through Author's
Guild) and ask for a contract review. It'll cost you
about $250 and it's money well spent.

She's in the process
now of acquiring an agent, as this same publisher will
soon be offering a contract on her second book.

Okay, here your friend has
an opportunity. She can amend the first contract in the
second contract. An agent can negotiate this on her
behalf. Change the first contract to tie the royalties to
retail and base the second contract on retail, limiting
rights and liability.

Neither of us knows
just what she should expect from an agent. Should
the writer spell out ahead of time what she expects to be
deducted from her gross?

No. As I said, you can't
tell a publisher how to do their accounting. What you can
do is tie your royalties to the retail sales price of the
book. Now some of the books will be discounted to sell
wholesale. That, the agent will allot for in the
contract. S/he will likely limit the ratio of books that
can sold at a discount versus at retail price, which
protects the author's interest.

How does a writer even
find out what all items can be potentially be deducted?

If the writer were to go
against industry standards and sign a contract structured
this way, then potential deductions and limits should be
spelled out in the contract. However, this tying to net
isn't typical industry procedure and frankly I wouldn't
sign it.

How much responsibility
does the agent have for understanding the financial end
of it well enough that the writer gets more than pennies
per book sold?

A reputable agent
understands all aspects of the business, including the
financial end of it. A main portion of his/her job is to
"wed" the right author to the right editor at
the right publisher with the right projects. That
includes handling the contracts. The agent has a vested
interest in getting her/his clients the best deal
possible. That agent receives 10-15% of what the author
makes. If the author makes pennies, the agent makes less.
Not apt to hold much appeal to the agent or the author.

Good agents are sharp as
tacks on finances, contract terms, and the art of
negotiating. The key is in making sure you've got a good
agent. AAR--Association of Authors Representatives--is a
good place to start. Its agents are all selling works and
have agreed to abide by a code of ethics. That's
important because being an agent doesn't require a
license and there's no body governing them.

Or does the agent just
negotiate the total contract, advance, etc.? I have
several reference books, but none of them get into the
specifics of what all can be charged against a writer's
gross and/or how a writer might protect
him/herself.

The agent does far more
than negotiate. S/he manages the writer's career,
develops a strategy, works with publishers, editors, the
author, to enact it.

The reason the reference
books don't get into specifics of what can be charged
against a writer's gross is because the practice of
charging against a writer's gross has surfaced with
e-publishing and print-on-demand publishers. It isn't
customary to typical publishing, which has traditionally
tied royalties to retail sales price.

It's a new world we're in
now, and we've got to get smart fast to keep from getting
burned. I'm sure your friend expected that her royalties
would be at least $2 per book if the gross was $4. That's
really not an unreasonable expectation. But when you
don't limit liabilities--what may be deducted from your
royalties--you often are disappointed.

Dr. Vicki Hinze is an award-winning,
best-selling author who routinely shares her expertise at
national writers' conferences, online, and through her
writing guides. Her latest non-fiction book is ALL
ABOUT WRITING TO SELL, from Spilled Candy Books for
Writers. This 589-page ebook covers everything you need
to know about the craft of writing, the publishing
business, and the secrets to getting published. ALL
ABOUT WRITING TO SELL is available at www.SpilledCandy.com as a download or
disk.